Credit/Debt Recovery

annualcreditreport.com linking shenanigans

I hope by now everyone grasps the FCRA (Fair Credit Reporting Act) and what it means to you.

One of the provisions mandated by Congress in the FCRA is that the credit bureaus had to set up a web site where consumers could request their free annual credit report.

The site they set up was www.annualcreditreport.com. 

But the bureaus, citing almost certainly bogus "security" concerns, aren't allowing third-party linking to the site. To get there, one must type the url into the browser. The only direct links that are supposed to work are from the three credit bureaus' official sites (and they aren't making the annualcreditreport.com link obvious, by any means) and from the FTC site.

The folks at EPIC (Electronic Privacy Information Center) have teamed up with the Privacy Rights Clearinghouse to request that this stupid linking policy be reversed.

More power to them. This seems like an obvious attempt by the credit bureaus to make it harder for consumers to find the annualcreditreport.com site, and prop up sales of their unnecessary "credit monitoring service" subscriptions and rip-off schemes like freecreditreport.com.

UPDATE: Apparently, EPIC and PRC have won this one... AnnualCreditReport.com now allows direct links!!

Important comments last week

I just discovered some very good comments on my October 24th post-I'm sorry it took me so long to notice them (election madness). I highly recommend reading them, because this is a crucial issue that's coming up.

Check out Darrien Nayz's comments here.

Of course, when I whine about profiteers and counselors who want to be for-profits, I'm usually talking about groups who are currently non-profits. That's the majority of the industry. And you bet some of them are unscrupulous. And yeah, I'll say it; some of those unscrupulous nonprofits are probably NFCC and AICCCA members.

The future of the industry will be decided by the IRS. Strip away the nonprofit status of traditional NFCC agencies, and it's game over. I really believe that. And you know what, some of those agencies may well end up being collection wings for the big creditors if that comes to pass. I'd consider that a sad outcome.

Get Smart About Credit Day

Today is "Get Smart About Credit Day," apparently.

Like I've been saying...

I know I promised an expose on predatory servicing today, but I saw this article and had to jump on it.

I've been saying for a long time that your credit history is more important than ever, and articles like this one just reinforce the point. Read it; many things in your life may depend on it.

The bottom line is, know your credit history; check it frequently and make sure it's accurate. If you don't know your way around a credit report, hire a reputable counselor to do the credit report review for you. Or read my book and follow the advice in there.

freecredit report my *$$

A few years ago, I was giving a credit seminar at UC San Bernardino, and a faculty member talked about how she was able to get a free credit report from freecreditreport.com, and how happy she was with it.

In my entire career, that makes a grand total of 1 person who was happy with their experience at freecreditreport.com. Everyone else I've ever spoken to who used the site got burned.

The amazing thing is that freecreditport.com is owned by one of the major credit bureaus, Experian (though you won't find any evidence of that on the freecreditreport site).

As you can imagine, I strongly urge you not to make use of the freecreditreport.com service (the new FACTA law will mandate that you get a free credit report anyway, it just might take some time). At the site, you'll be enrolled in Experian's CreditCheck Monitoring Service, which is a subscription thing that'll start sucking money out of your bank account after the first 30 days. Sure, you can quit your membership and not be charged, but good luck; like I said, I've only ever met one person who ever pulled off getting a completely FREE credit report from these guys. Everyone else I know ended up paying for a subscription service they didn't want.

Caveat online emptor!

Dave Ramsey

Given my line of work, it's amazing I hadn't discovered Dave Ramsey before now. So far, I'm incredibly impressed.

He's a talk radio guy who focuses on money matters, in particular eliminating debt. Check him out at www.daveramsey.com, and see if there's a radio station near you that broadcasts his show.

I'm certainly not recommending that you buy his book instead of mine... :-), but I like the way he thinks. For one thing, he doesn't immediately recommend bankruptcy, no matter how rough a caller's situation seems (I'm sure Consumer's Union, the Consumer Federation of America, et. al. don't like him for that reason, since they think bankruptcy should be a consumer's first resort). He's a big believer in taking personal responsibility, budgeting, and taking realistic, proactive steps to better manage your money.

Having said that, he's a very commercial guy; it'd be easy to spend hundreds of dollars at his site. I can't recommend doing that at this point. I'm just recommending him for a listen (you can listen to his broadcasts by streaming audio on his site). Also, he trains others to become financial counselors, and I can't say I'm entirely comfortable with that. I've not seen a counselor training program more rigorous than the NFCC's, and until I do, I won't recommend anyone else.

But by all means, give Dave Ramsey a listen; you may be as impressed as I am. (I think he runs circles around Suze Orman.)

Curiouser and Curiouser

In response to my credit score problem, Craig Watts of Fair, Isaac Co. says:

"For a FICO score to be calculated three conditions have to be present in the person’s credit file. It has to contain at least one account that is 6 months old or older. It has to contain information (updates) provided by a creditor within the previous 6 months. And the file can’t contain any “deceased” indicators. What Jeff is apparently referring to is the second criteria I’ve listed. However, it doesn’t matter if there is no activity so long as a creditor continues to report to the credit bureau on an account in the file. In other words, Macy’s may continue to tell the CB each month that the card account held by me still has a zero balance. So long as Macy’s is updating its information, my file would satisfy the second criteria even if that were the only account I’ve ever had open. As some point creditors will stop reporting updates to the CB on an an inactive account, but that decision is up to each creditor."

Big thanks to Craig and Fair, Isaac for being so responsive and helpful.

But....

I called MBNA, and three different people there swore that they DO report updates every six months. In fact, I'm looking at my (Kroll Residential Merged) credit report right now, and it says "MBNA America Reported 07/04," but down where it says "Credit score information" it just has "N/A" with each of the three credit bureaus.
Experian says "Risk score not available due to model exclusion criteria."
TransUnion says "File not scored because subject does not have sufficient credit."
Equifax says "Beacon not available, no recently reported account information."

Well, according to MBNA, they did recently report my account as paid in full, no lates, no balance, etc.
There is at least one account at least 6 months old (21 months old to be precise).
And I'm not deceased.
So where's my score?
The folks at MBNA suggested that the problem was at the credit bureau level, but all three of the credit bureaus have no score... could they all be making the same mistake? Doubtful.
Fair, Isaac tells us it's up to the creditor to keep reporting the account, but MBNA swears they're doing just that. So is the problem with FICO?

On the surface, it seems the lack of score stems from something at the FICO level, but my hunch is there's actually some problem with the way MBNA is reporting the account. At any rate, they're not going to change anything, so it's moot. I have to use alternative credit and go through FHA.

Advice to COB readers: if you're trying to build credit, don't make MBNA your first account. Start with a Macy's card. I know from people I've counseled that they keep reporting an account for YEARS, even if you never use it. Maybe that's why Craig picked it as an example in his response above.

I'll keep you posted on how this develops, and I'll be back to bash the Consumers for Responsible Credit Solutions soon!

FICO chapter 15, verse 11

My adventures in trying to become a homeowner have gotten me thinking. While any negative stuff on my credit report would stay on there and affect me for seven years, the positive stuff disappears after a year. (Actually, I've already heard from someone who lost their credit rating after six months of inactivity.)

Ever wonder where that seven year limit comes from?

Deuteronomy 15:1-2:

At the end of every seven years thou shalt make a release.
And this is the manner of the release: Every Creditor that lendeth ought to unto his neighbour shall release it; he shall no exact it of his neighbour, or of his brother...

Makes you wonder. Are negative items purged after 7 years because of ancient Jewish laws?

Of course, the Book has a few things to say on the subject of usury that seem to be ignored by everyone these days, so I'm not going to read too much into this. (Wow, not reading too much into the Bible... tall order.)

The Incredible Vanishing Credit Score...

I had a huge shock yesterday when I visited a mortgage broker to apply for a home loan. Apparently, if neglected, credit scores can vanish completely. I don't mean shrink; the score didn't go down. It went away altogether.

Let me back up and give you some history. For years now I've been preaching the benefits of saving, using credit wisely, living on a budget. The saving part was hard, but I practiced what I preached, and built up a nice down-payment fund.

As far as using credit goes, I was in a unique situation. I had never borrowed a dime in my adult life. I never had a credit card, never took out a student loan (thank you work-study and teaching assistantships), and I always bought my vehicles outright with cash.

I got that from my dad... my whole life, I never saw him swipe a credit card or write a check. He was a cash-only kind of guy.

Of course, when I applied for a mortgage a couple of years ago, I learned that having NO credit score was as bad as having a LOW credit score. They laughed me out of the loan office.

So, I went out and did what I advise in Repair Your Credit And Knock Out Your Debt. I had been saving up to buy a new computer, but rather than just pay for it outright, I got a loan to buy the computer (and it wasn't easy to get, given my lack of credit history. I ended up paying something like 26% interest).

Now I know that it takes six months to build a credit history, so I couldn't just pay the thing off in one payment. Instead I paid 1/6th of the balance every month and had it paid off in 6 or seven months. Voila! Credit history (and score) established.

Okay, fast forward a year. I checked my own credit report a few months ago (as I advise in my book) to make sure there were no surprises before I applied for a mortgage this time around. Everything looked good, the score was more than high enough.

So yesterday, when the mortgage broker pulled my credit, what did she find? No score.

We were all baffled. Here were a broker with 20 years of experience, and a published author in the credit/debt industry, and we'd never seen anything like it. How does a credit score disappear?

We called the credit burea, and were shocked to learn that if there's no credit activity for twelve months, the score goes away. I didn't know that! I thought I'd done everything right; I still had an open credit account with a high limit, no late payments or negatives of any kind, account paid in full. But because I hadn't used that account (my last payment on the computer was July '03), they took my score away.

Working in the industry as I do, I'm not a big believer in incurring debt and carrying balances. But here I was being punished for it. If I'd taken an extra month or two to pay off the balance, (or applied for a mortgage a few months earlier) that activity would still be there to give me a score.

So now I have to take another six months to establish a score, or I have to use FHA to establish arternative credit (which leaves me with an ARM and a 3% down payment... I was thinking more like 20% down.)

I'm pursuing other options. But let my story be a cautionary tale: when it comes to your credit score, use it or lose it!

YourCreditCardCompanies.com--at long last

It's WAY overdue, but finally the creditors are stepping up their efforts to prevent credit card fraud and ID theft.

www.yourcreditcardcompanies.com is a joint effort of Citibank, Mastercard, MBNA, Discover, Capital One, and Chase Manhattan. They're going to be launching major ad campaigns to help people protect their identity and credit accounts from criminals.

It's about time. Who knows how much these six entities have lost to identity thieves over the last decade? Millions? Billions? (Answer: depends on how you look at it... they haven't really lost a dime; they've passed that enormous cost on to us in the form of increased fees and interest, and new tricks like Universal Default.)